A bitter election won't derail Poland's economic miracle

Yahoo

2 days ago

It will be a bitter contest, with insults hurled in both directions, dire warnings about the end of civilisation if the other guy wins, and a close result that the loser won't accept as legitimate.
Poland will elect a new president on Sunday, in a run-off between the liberal Warsaw mayor Rafał Trzaskowski and his Right-wing opponent, Karol Nawrocki, supported by the populist-nationalist Law and Justice opposition party.
The result is too close to call. But one point is certain. Either way, it won't derail the Polish economic miracle. In reality, with emigrants returning from countries such as the UK, and with its GDP per capita overtaking many more developed nations, the Polish economy will survive its divisive politics – and keep on growing.
The contest has been as bitter as any in the developed world. Over the last few weeks, Trzaskowski and Nawrocki have traded insults that make British politics look mild by comparison.
Nawrocki has brushed aside allegations that he took advantage of an ill senior citizen to acquire his council flat at a huge discount; and that he helped arrange prostitutes for guests at the luxury Grand Hotel in the seaside resort of Sopot when he worked there as a security guard. Meanwhile his opponent has been accused of breaching campaign spending rules.
The contest pits the liberal pro-EU centrists of Polish prime minister Donald Tusk against the Trumpian nationalists of Law and Justice. To listen to some of the rhetoric you would think the future of Western civilisation was at stake. They hate each other with a passion.
The blunt truth, however, is this. To Poland's miracle economy it won't make much difference either way.
Over the last decade, the country has emerged as one of Europe's most successful economies. It sailed through the financial crash and then the pandemic without ever slipping into even a mild recession, and has been chalking up 3pc to 4pc annual growth rates for the last 10 years.
This year it is forecast to expand by another 3.3pc, easily surpassing the moribund economies of Germany, France and of course the UK.
That consistently stunning performance is starting to be reflected both in rapidly rising living standards and a booming stock market. The benchmark Warsaw index is up by 25pc this year already, and may well rise even higher over the rest of the year.
Meanwhile, Poland is forecast to overtake the UK and even Japan in GDP per capita by the end of the decade.
It may well strengthen even further over the next few years. There are three reasons for that. First the huge Polish diaspora, with more than a million of its citizens in the UK, is starting to drift back home.
They are starting to work out that the country they left behind is doing better than the one they moved to. As they return, they will bring skills, capital and contacts with them.
Likewise, Polish companies may have started as sub-contractors of Western businesses but they are starting to become substantial operations in their own right, with many of them now expanding abroad (such as Pepco, the owner of Poundland in the UK).
Finally, as Poland gets a lot wealthier it has developed a booming domestic market that generates plenty of demand. The days when it was a cheap manufacturing hub for German companies are fading into the past.
On current trends, Polish companies will soon be outsourcing work to cheaper German or British factories instead of the other way around.
Poland's success is often claimed as a victory for the EU. In reality, although the single market helped with the first wave of inward investment, Brussels did not have much to do with it (indeed, under the last government funds were withheld and it didn't make any significant difference to the rate of growth).
It is based on a solid set of fundamental principles. Poland has relatively low taxes, with a corporate tax rate of 19pc, and a 9pc rate for smaller companies, and a top personal rate of income tax of 32pc, which is low compared to the rest of the Continent. It has little debt by European standards, with the debt-to-GDP ratio standing at just 55pc.
It has wisely kept its own currency, and although it is meant to join the euro one day, conveniently it seems to never quite get around it (even the fiercely pro-EU Tusk isn't interested). And it has competitive markets, a smallish state, and a skilled workforce.
There is nothing very complicated about it. These are the textbook ingredients for economic growth. It is just that the rest of Europe has forgotten them.
The Left and Right trade in blows over cultural identity, abortion, immigration and integration into the rest of the EU. But on the fundamentals of the economy there is not much to choose between them.
Both parties want to stay inside the EU but outside the single currency, by far the best mix for a fast-growing emerging economy. They both want to limit mass unskilled immigration (even Tusk is firm on that issue, and refuses to accept Poland's 'share' of asylum seekers).
They both want to keep taxes and government spending under control, even if the two sides are as keen on bribing their supporters as politicians everywhere. And they both believe in standing up to Russian aggression; in Poland everyone knows what that can mean.
The Poles argue with each furiously. We will see who wins the presidency later this year. Whoever it is will no doubt claim it is a turning point for the country. For its national identity, perhaps it will be.
But it won't make any difference to the Polish economic miracle. It will keep on growing at a rapid rate – and on current trends in another decade it will be one of the wealthiest countries on the Continent.
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